Watchdog to announce findings of probe into dominance of big banks

The competition watchdog is set to announce its initial findings from an investigation into the big banks’ dominance over high street banking.

The Competition and Markets Authority (CMA) announced its decision to launch an in-depth market investigation into the personal current account and SME (small and medium enterprise) retail banking sectors in November 2014.

Its provisional findings will be set out today, with a final report expected around April 2016.

Concerns about the effectiveness of competition in these sectors include low levels of customers shopping around and switching, as well as a limited level of transparency – particularly concerning complex overdraft charges which make it hard for customers to work out if they would be better off elsewhere.

The competition watchdog also said previously that there has been ”very little movement” in the market shares of the four largest banks, which are Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland (RBS).

It said that the big four banks collectively supply more than three quarters (77%) of the personal current account market in the UK, as well as more than 85% of business current accounts and 90% of business loans.

The probe will decide if there are problems which prevent, restrict or distort competition in the sector. If the investigation finds there are, it will come up with remedies.

The CMA has wide-ranging powers which can be used in cases where they are deemed necessary, including forcing firms to change their behaviour or alter their structure and shaking up whole markets.

Research by the CMA has found that 37% of people had been with their main provider for more than 20 years – and a further 20% had been with their provider for between 10 and 20 years.

The research suggested that the people who were more likely to switch banks were male, aged between 18 and 44, were customers of smaller banks and did not hold an authorised overdraft.

Some 65 million active personal current accounts exist in the UK, while there are more than 3.5 million business current accounts.

The personal current account market generates revenues of more than £8 billion, while the CMA’s investigation into SME banking includes more than £2 billion of business current account market and business loans.

Smaller players in the market have been pressing for a shake-up.

Tesco Bank recently called for a traffic light labelling scheme to be introduced for current accounts to make it easier for customers to compare deals at a glance, in a similar way to supermarket food labelling.

Meanwhile, TSB chief executive Paul Pester has said banks should send their customers a bill each month to help them understand the true cost of their account.

Mr Pester has said that, at present, the true cost of banking for consumers is covered in a ”cloak of secrecy”.

TSB has argued that the myth that banking is ”free” causes further confusion. In reality, consumers are paying for their bank accounts, through borrowing charges and foregone interest on their balances that they could have made by moving to another bank or building society.

A new seven-day current account switching service was introduced in 2013 to make it easier for people to move banks, and there have been calls for more to be done to raise awareness of this current account switching scheme.

Simon Hunt, PwC’s UK banking and capital markets leader, said the growth of technology and digital banking has helped to increase customer choice.

He said: “Digital customers can pick and choose, switch, complain and compare more easily than ever before when it comes to banking.

“Technology such as the smartphone and all the things it can do, from facial recognition authentication to Bitcoin payments, will drive competition in the sector from now on.”